Budget Showdowns, Government Shutdowns, and Paul Ryan's Proposal

Rep. Paul Ryan (R-WI) with the Republicans' 2012 budget proposal, dubbed 'The Path to Prosperity.'

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Congresswoman Marsha Blackburn (R-TN) discussed the budget negotiation on the hill; and John Heilemann, national affairs editor for New York Magazine; Paul Starr, professor of public policy at Princeton; and Ed Haislmaier, health policy researcher at the Heritage Foundation discussed Paul Ryan's 2012 budget proposal.

The 'Right' Approach to Medicare and Medicaid

Congresswoman Marsha Blackburn has faith in Rep. Paul Ryan's newly-introduced budget, which slashes federal spending by $6 trillion over the next decade. Two of the most controversial means to that end are turning Medicaid payments into block grants for each state, and changing Medicare into a voucher program for seniors to purchase private insurance.

With regard to the latter, Blackburn and Republicans tout increased flexibility for seniors in addition to lower costs.

[Seniors] would like to be able to have a support payment every year to stay in their health insurance plan with an employer because they're not planning to retire at 65, they might be planning to retire at 72...What you're seeing in the Ryan plan is the opportunity for seniors and individuals to choose how they plan to work, when they want to retire.

Pro-choice, or no choice?

Professor Paul Starr disagreed with Blackburn's characterization of the Medicare proposal. He said that by taking the government-run program off the market and leaving only private insurers to cover seniors, you're literally reducing the number of options, not offering more. Losing traditional Medicare is also dangerous simply because private businesses would no longer have a federal yardstick, Starr said.

Medicare beneficiaries can choose private plans now. To say this increases choice is misleading; it's diminished choice. They'd no longer have the option of the traditional Medicare program. By eliminating that, this proposal would eliminate all of the rights people enjoy under Medicare. There would be no guarantee that you could buy the benefits people now have.

A flawed system

Ed Haislmaier of the Heritage Foundation—a conservative policy research center responsible for many of the estimates in Ryan's budget—took issue with Starr's argument, countering that private insurers are better at controlling costs and serving beneficiaries than Medicare. By not giving enrollees the choice of how to use their own trust fund, the federal government ends of paying more money for less efficient care.

Who's entitled to something under Medicare? Medicare doesn't actually entitle the beneficiary to anything. People who get the entitlement are doctors and hospitals; they're entitled to get paid if they do things. The proposal says the beneficiary is entitled to a certain amount of money, then the beneficiary has increased power and choice on how to spend that money.

'This is really class legislation'

For Paul Starr, the bottom line is that it's hard to trust Ryan's Medicare and Medicaid changes considering his budget proposal also includes a ten percent tax cut for corporations and the wealthiest Americans.

This is really class legislation. It's a tax cut for people at the top, and it's a block grant of Medicaid and a limit on the amount of money for Medicare, and the real result of that is lower income people are going to get screwed.

John Heileman of New York magazine felt that Starr was correct. He said that increasing the austerity of entitlement programs without a corresponding increase in federal revenues focuses the pain on the lower class in a manner that's hard to ignore.

There's a view that would say, look, if you are serious about reducing the deficit, if that's your primary goal. and not your primary goal being to reshape role of government in American society, then you need to take on entitlements, but you also need to deal with the revenue side of picture. The fact that he's left the Bush tax cuts intact certainly skews the program such that people who come out better are people who are richer, and people being asked to shoulder the burden are those on the lower end of the income scale.

Closing loopholes enough?

Ed Haislmaier said it was a mistake to think lower tax rates necessarily mean lower tax revenue. Historically, the federal tax code has swung back and forth between high tax rates with a lot of loopholes and deductions, and low tax rates with few ways to get around paying. According to Haislmaier, revenue evens out to be in the same ballpark either way. Ryan's proposal isn't a radical shift from the norm, he said; it just opts for the low-tax, low-loophole arrangement.

Regardless of lower rates with fewer loopholes or higher rates with more loopholes, the government takes in about the same amount, which is about 20 percent of GDP. What Representative Ryan clearly says in this bill is that his tax reforms would bring that down to that historic level by lowering rates but closing loopholes and deductions.

What really matters

Whatever one's feelings about Ryan's proposal, John Heileman said that the Representative exhibited a lot of political courage by coming forward with these gutsy, unpopular reforms. Ryan's timing is especially interesting given that the government will shut down Friday night if Congress can't come to an agreement on this year's budget. Heileman believed that by pivoting attention to next year while this year's work remains on the table, Republicans may be trying to appease their more conservative constituents who feel the current round of spending reductions aren't enough.

What they wanted to say to the further right elements of the party that are right now applying pressure that are making a short term deal for 2011 budget hard to do, it's saying, 'Look guys, if we're going to fight a huge fight, let's have it over something that matters. This is where the big stakes are. Let's not waste all of our cannon fire here and risk shutting down the government over something that is in fact trivial.'